Grate expectations – why EU is warming to coal again

CALIFORNIA-style energy crises, rolling blackouts, global security concerns and noisy windmills have all served to put coal back in the limelight.

The old reliable industrial backbone of the past two centuries has re-emerged as a new pillar of American energy policy, and the same sense of urgency in returning to coal has now also hit a European market worried about energy supply and prices, according to the industry.

Andrea Clavarino, the Rome-based chief of commodity trader and transporter Coeclerici and president of the Italian coal industry association, Assocarboni, said he has suddenly found himself in greater demand than ever before.

“Three years ago no one even thought of coal, now I go to every conference. Certainly things have changed after 11 September [2001],” he said.

Italy imports more than 80% of its energy needs. Some 60% of this demand is met by imported oil and gas. Clavarino claims the prices of these fossil fuels are responsible for making Italian electricity prices 40-60% higher than in the rest of the EU.

By 2005 more than half of Italy’s energy needs will be met by imported gas from just two countries, Algeria and Russia, the founder members of the Gas Exporting Countries Forum (GECF), also known as the ‘Gas OPEC’. It was created largely to counter the erosion of long-term contracts as the EU energy market is liberalised.

Clavarino claims these two countries will have the power to set prices in an import-dependent Europe.

To sound the alarm, Assocarboni has set as one of its “main tasks” during the current Italian EU presidency to “point out at European level the power dependence on imported natural gas from mainly two sources of supply: Gazprom in Russia and Sonatrach in Algeria,” he said.

“European electricity consumers – both industrial and residential – must know that European energy policy is sustaining the use of the most expensive fuel that is supplied and controlled by an oligopoly of two producers.”

He also claims that two-thirds of the world’s coal-fired capacity needed for 2030 has yet to be built.

“Today 39% of electricity generation in the world is produced from coal and it is forecasted to supply around one quarter of the world’s total energy demand and almost 45% of electricity generation into the future,” he said.

In 2003, he adds, coal-fired power plants have become increasingly important in Japan, where 17 nuclear reactors have been closed for maintenance checks.

In Italy, coal is used in a mere 8% of total electricity generation. But ‘clean’ coal technology, which eliminates carbon dioxide as well as sulphur and nitrous oxide emissions from coal-fired power plants, can transform the fuel’s use, its supporters say.

This involves ‘carbon sequestration’, literally the separation, capture, transportation and storage of carbon dioxide, with the aim of removing CO2 emissions from the coal-burning process (see Page 17).

To this end, Italy, the UK, the European Commission and the United States last June in Washington signed up to a joint Carbon Sequestration Leadership Forum.

Despite some initial resistance, notably from environmental groups, “now we are getting support”, said Clavarino.

But environmentalists and some scientists are sceptical about whether or not carbon sequestration – which involves packing CO2 into hollow formations in the earth (or eventually underwater) and putting a kind of leakproof lid on it – would really work.

“If we cannot ensure that there will be no leakages, then this is a waste of everyone’s time and money,” said Oliver Rapf, a climate policy officer with the World Wide Fund for Nature in Brussels.

“We are talking about putting millions of tonnes of carbon into geological layers, so any seepages would prove disastrous for the climate.”

Despite such ecological doubts, Antonio Marzano, Italy’s industry minister, also plugged coal during an informal meeting of EU energy and environment ministers last July in Montecatini, Italy, when he described ‘clean coal’ as “the renewable energy most easily available on earth”, a definition Clavarino wholeheartedly supports.

Clavarino does concede that, in the long run, renewable energy sources including wind, solar and geothermal energy options must be added to Europe’s energy mix.

In the short to medium term, however, coal could come to the rescue, he adds.

And there are still other reasons to turn to coal, say some of his northern counterparts.

According to the Stockholm-based Swedish Coal Institute, public opposition has been mounting in usually eco-minded Scandinavia to wind power, as most people are not keen on

having noisy windmill farms in their own backyards.

But only some 7% of energy needs are currently met by coal in Sweden.

State subsidies for coal still exist in several member states, including Spain and Germany, although both countries have come under pressure from the European Commission to phase out the payments.

According to Wolfgang Ritschel, managing director of Hamburg-based Verein Kohlenimporteurer, domestic-mined coal costs three times the world market price.Cheaper coal imports, mostly coming from countries outside the EU such as Australia, South Africa and Colombia, have been filling in the gaps.

Poland, though a major coal producer, is rationalizing its own industry and will be unable to replace closed German coal production, said Ritschel.